Sunday, October 28, 2012

Many viewers of the final presidential debate between Pres. Barack Obama and Gov. Mitt Romney were expecting, if not hoping for, a climactic fight to the finish. What we witnessed appeared more as a one-sided demonstration of self-restraint and unexpected mercy in the face of vigorous though ultimately ineffective attacks.

The Obama campaign had telegraphed its intention to define Romney as a warmonger, but when Obama tried to stamp the label on him, the president found himself punching air. Romney saw him coming. At times it appeared as if the president was shooting at his own reflection in the mirror.

Romney fans might have been disappointed that their man did not go for the kill. If so, they missed the point. He was choosing his terrain and his battles. By showing agreement with the president when warranted, or when inexpensive, Romney neutralized issues that would yield little advantage to him. He seemed to know that the last thing we would want to see in a commander-in-chief is someone who would lead us into the enemy’s killing zone.

Romney has accepted the 2014 deadline for our departure from Afghanistan. He recognizes the deadline as part of a plan that he will inherit, and that to change it would cause disruption of the military plans now in place. He knows that, short of an armistice, a strategic withdrawal is better executed the less an enemy knows about its timing. But the timing is already known, so work with it and concentrate on other variables.

Romney’s blocking of expected approaches enabled him repeatedly to channel his foe away from foreign policy and back to the president’s area of greatest weakness, the economy. Compared to the president’s record and stated intentions, Romney’s economic plan is superior along all major dimensions: a simpler, less-burdensome tax structure; energy friendliness; elimination of “ObamaCare;” the reduction of regulatory burdens; a more credible approach to deficit reduction; and the end of quantitative easing that now threatens the dollar.

To declare China a currency manipulator cannot be seen as wise from an economic analyst’s perspective, but it could serve as an opening gambit to higher-stakes negotiations. Currency weakness is China’s problem only because it is our problem. While they would naturally prefer to have exchange-rate stability with their major trading partners, our weak dollar policy threatens them with price inflation unless they let their currency rise.

Now, especially with the prospect of a Romney victory, Chinese leaders have greater incentive to let their currency fluctuate with apparent freedom. What the Chinese really need, if they wish the full benefits of peaceful trade, is greater respect for private property rights.

Not even a libertarian president, which neither candidate promises to be, would get us where we need to go in the next four years without the requisite political skills and support. A dispassionate analysis requires us to recognize that effective political solutions are not made-to-order for individual preferences, but rather served up as a stewlike mixture intended to be good enough for a large market.

Romney’s plan and the philosophy it reflects offer us the greater hope for future peace and prosperity. His varied approach to each of the three debates, as much as his demonstrated command of the issues and details, showed the necessary insight and strategic sense to temper those policies that might not fit future situations.

Richard J. Grant is a Professor of Finance and Economics at Lipscomb University and a Senior Fellow at the Beacon Center of Tennessee. His column appears fortnightly on Sundays. E-mail messages received at: rjg@richardjgrant.com

Sunday, October 14, 2012

If we wish to have our federal government continue to spend 23 percent of the gross domestic product (closer to 40 percent if we count state and local spending), then we and our descendants must eventually be willing to pay roughly 23 percent of our incomes in taxes.

There is a limit to our borrowing capacity, and if we continue to cover 40 percent of the federal budget with borrowed money, we will soon experience that limit. The only way out is to ensure our economy grows significantly faster than government spending.

We cannot expect to achieve this by raising tax rates, unless those who bear the burden of these higher taxes do so cheerfully. Starting from relatively low rates of taxation, this is conceivable. But as tax rates rise, and more income is transferred from its private creators to those who will administer its disbursement, our productive potential will decline. Neither of these trends has been shown to foster cheerfulness.

It is not just the payment of taxes that limits our growth potential. There is no point in discussing tax policy without considering the purpose of the tax, the amount of revenue needed, and how that revenue will be spent. The purpose might not even be to raise revenue but rather to discourage some activity deemed socially undesirable, such as smoking. But our current discussions largely revolve around the size and persistence of the national budget deficit, the excess of government spending above tax revenue.